Method and apparatus for detecting fraudulent loans

ABSTRACT

The present invention relates to a method and apparatus for detecting fraudulent activity by preventing the rapid funding of multiple loans on the same property, by providing a collective database where real estate property information is examined and the apparatus detects whether at least two mortgage applications are using the same property as collateral.

CLAIM OF PRIORITY

This application is a Continuation of and claims the benefit of priorityunder 35 U.S.C. §120 to U.S. application Ser. No. 11/623,020, filed onJan. 12, 2007, which is a non-provisional of and claims the benefit ofthe earlier filing date of Provisional Application No. 60/870,042, filedon Dec. 14, 2006, the entire contents of each of which are expresslyincorporated by reference herein.

FIELD OF THE INVENTION

The present invention generally relates to a method and system fordetecting fraud. More specifically, the present invention relates to amethod and apparatus for detecting fraudulent activity by preventing therapid funding of multiple loans on the same property.

BACKGROUND OF THE INVENTION

FBI statistics indicate that mortgage fraud is on the rise. In somecases, consumers seek to defraud mortgage lenders for personal profit.To this end, borrowers seeking to defraud lenders have becomeincreasingly sophisticated. A large national bank reported millions ofdollars in losses when consumers apply for multiple loans with multiplelenders, on the same property. For example, suppose an individualapplies for and is approved for an equity loan at 123 Jones Street inFresno, Calif. Not only has the borrower been approved by lender A, buthe was also approved by lender B, lender C, and lender D for an equityloan on the same property. Thus far, there is no problem. Consumers havea freedom of choice to apply for a loan wherever they desire. Theproblem comes when the approved loan is not in a second lien position asstated as a condition for approval in the application. Having securedand funded an equity loan with lender A, fraud occurs when the borroweralso secures incremental loans with lenders B, C, and/or D. Equity loanstypically involve minimum advances (you take cash from the signingtable) and immediate access to cash via checking accounts or debitcards. The unscrupulous borrower can take the funds and run from lendersA, B, C, and/or D. The losses at lender A may be covered by the equityin the home, however, the losses at lenders B, C, and/or D are completeand non-recoverable since the property has been stripped of any owners'equity.

SUMMARY OF THE INVENTION

The present invention attempts to remedy the problems discussed above,amongst others, related to fraudulent activities which occur duringmortgage transactions between consumers and various lenders.

The present invention provides a novel system and method which is ableto detect and prevent fraudulent activity by consumers attempting toobtain two or more fraudulent loans on the same property.

The present invention further provides a novel system and method whereinlenders are able to identify areas of strengths and areas of weaknesseswith respect to mortgage application completion time.

The present invention further provides a novel system and method whereina third party can proactively monitor deals that hit various alertstages and can directly call lenders to suggest further investigationand/or alert them of any suspicious activity.

BRIEF DESCRIPTION OF THE DRAWINGS

The above, as well as other advantages of the present invention, willbecome readily apparent to those skilled in the art from the followingdetailed description of the preferred embodiments when considered in thelight of the accompanying drawing in which:

FIG. 1 is a printout of an exemplary report of the present invention.

FIG. 2 is diagram of an exemplary embodiment of the Prism Databasesystem.

FIG. 3 is another diagram of an exemplary embodiment of the PrismDatabase system.

FIG. 4 is an exemplary report produced by the Prism Database systemdiagramming various actions taken by the company and industry in theapplication process.

FIG. 5 is another exemplary report produced by the Prism Database systemdiagramming various actions taken by the company and industry in theapplication process.

FIG. 6 shows one the flow charts of an exemplary embodiment of thepresent invention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

The present invention provides a method and system for detecting andpreventing fraudulent activity by preventing the funding of multipleloans on the same property/same address.

The present invention generally relates to a method and apparatus forcollecting information from mortgage applications to determine whetherthere has been more then one application submitted for the same propertyto obtain a loan or collateral on that property. However, the preferredembodiments of the present invention may include a method and system forcollecting information from approved mortgage applications to determinewhether there has been more than one application submitted for loan orcollateral to a lender. It should be appreciated that even though theterm “approved application” is a commonly used term in the industrywhich describe an application where the lender has agreed to fund theapplicant with no conditions, that there are similar uses for theseterms. For example, there are many instances where lenders still usethis term when there are certain conditions, pending a search todetermine whether there are any liens on the property. The presentinvention can be used to describe various types of loan applications,even though in the preferred embodiment “approved” applications arebeing used.

The application also uses the term property to describe a piece of landand/or building (e.g., house) located on that land. It should beappreciated that this property may be identified by numerous waysincluding, but not limited to, property address, parcel number, mapcoordinates, lot numbers or other similar identifiers as known to oneskilled in the art.

The present invention collects on a cooperative basis desired mortgageapplication data from one or more lenders about each of their potentialborrowers. In one exemplary embodiment, the only loans submitted to themain database, a.k.a. PRISM database, are those loans that have receivedpreliminary credit approval from the lender. For example, the type ofapplication data that can be collected may include, but is not limitedto: (1) Loan Number; (2) Loan Status (Doc. Prep., Closed, Funded, etc.);(3) Loan Status Date; (4) Subject Property Address; (5) Subject PropertyState; (6) Subject Property Zip; (7) Borrower First Name; (8) BorrowerLast Name; (9) Loan Amount; (10) Sale Amount; (11) Appraised Amount;(12) Channel; (13) Loan Purpose (Purchase, Cash Out Refi., Rate/TermRefi., HELOC); and/or (14) Loan Product.

The present invention is a fraud detection system comprising a moduleincluding a main database, e.g., a server, which may internally includea software program which is able to extract various data from theapplication submitted by the various lenders, and furthermore, themodule is able to compare the data and provide the desired informationfor each lender. As previously discussed, the general informationprovided by the module includes alerting the lenders whether anapplicant has more than one application on the same property which hasbeen approved by two or more lenders. Moreover, other information can beobtained as discussed below with reference to FIGS. 4 and 5. It shouldbe appreciated that the software program may be placed on anotherserver/database in an alternative embodiment.

FIG. 1 illustrates a sample Prism Match Report which is a reportgenerated by the present invention. The section entitled “MultipleApplication Pending” shows a situation where there are two mortgage loanapplications pending, loan application #05-7615 and loan application#11-8119. The first two digits of the loan number can, for example,indicate the lender number. Therefore, loan application #05-7615originated from lender #05 and loan application #11-8119 originated fromlender #11. Loan application #05-7615 was submitted on Aug. 15, 2006 andloan application #11-8119 was submitted on Aug. 20, 2006. Both loans hadtheir status updated on Aug. 28, 2006. The reason these two mortgageloan applications were flagged was because there were some matches inthe loan application profiles. For example, both loan applicationstarget the same property address 39 Greylock Ridge, 14534, and both havethe same borrower name. However, the “Action Required” field indicatesthat there is no immediate action required. The present invention,however still considers this a “watch” situation for both lenders sincethis is a “potential” fraud situation in the making. Accordingly, thesystem reports that loan number 11-8119 should be put on “watch” statusas indicated in the report in FIG. 1. Furthermore, it should beappreciated that the report could be configured to indicate a “watch”status for both the lenders, depending on the desires of the users,e.g., lenders. [0211 In the second section entitled Possible FraudScenario 1, loan application #05-9111 and loan application #15-7115could possibly have some problems. For example, both loan applicationstarget the same property address 3901 Mineola Way, 33579, and both havethe same borrower name. Unlike the previous situation, there could besome problems in this situation because while loan application #05-9111was approved, loan application #15-7115 is already waiting for loandocuments that were sent out, to come back signed. Thus, loanapplication #15-7115 is much further in the process than loanapplication #05-911I. Therefore, the action required field indicatesthat lender #05, the originator of loan application #05-9111, shouldcheck with lender #15, the originator of loan application #15-7115, onthe status of loan application #15-7115, before lender #05 sends out anyloan documents for signature for loan application #05-9111.

In the third section entitled Possible Fraud Scenario 2, loanapplication #05-6515 and loan application #09-3517 have some severeproblems. For example, both mortgage loan applications target the sameproperty address 15 Orion, 92506 and both have the same borrower name.Here, there is a strong possibility that fraud is being committedbecause while loan application #05-6515 has received signed documents,loan application 409-3517 is already being funded. Thus, the actionrequired field indicates that lender #05 should stop loan application#05-6515 and contact lender #09 to notify lender #09 that the borroweris attempting to secure two loans on the same property.

FIG. 2 shows a block diagram of the main database system 5. A maindatabase 5, a.k.a. PRISM database, contains information collected fromparticipating mortgage lenders about every loan applicant for eachparticipating mortgage lender. The main database 5 can be accessed by anunderwriter 20 from a lender 15 via a loan pipeline 10. The maindatabase 5 can also generate an e-mail alert 25 that is sent to theunderwriter 20 in situations where there is important information abouta mortgage loan application such as the creation of another mortgageloan application through another lender which is secured on the sameproperty. In the exemplary embodiment shown in FIG. 2, the underwriter20 can have access to a fraud hotline 35 via a communication device,e.g. phone 30, computer, etc., in case the underwriter 20 has questionsregarding how to work with other lenders to stop fraud.

In one exemplary embodiment, a third party (e.g., offshore telephonicclearing house) may search the main database 5 for potential fraudwithout disclosure to the originators. The third party can proactivelymonitor deals that hit alert stages and can directly call lenders tosuggest further investigation and/or alert them of any suspiciousactivity.

As shown in FIG. 3, the reports can also be generated and/or accessed inreal time. In that situation, an individual lender user 50 can sendreal-time submissions 45 to the main database 5 which containsinformation collected from loan applications. This information is thenavailable to other underwriters 20 and lenders 15. In addition, theindividual lender user 50 can receive reports 40 from the main database5 in real time. These reports can include, for example, an analysis of amortgage loan application that the individual lender user 50 hassubmitted to the main database 5. These reports can also include, forexample, other mortgage loan applications, which the individual lenderuser 50 wishes to review. Reports can also be generated on the overallstatus or status of certain operations of lending institutions. Thesereports can then, for example, be analyzed on their own, or in contextwith other reports from the same lending institution or other lendinginstitutions.

For example, in FIG. 4, the present invention can compile a chart basedon mortgage application data collected. This can be useful, for example,to disclose the percentage of applications that are duplicates or inother words have applications which are filed with other lendinginstitutions that target the same property for collateralization. In thereport, for example, there can be a benchmark value disclosing theaverage value of the industry for comparison. This is indicated as“benchmark value” on the chart in FIG. 4. There can also be a valuedisclosing the user's value. This is indicated as “your value” on thechart in FIG. 4. Thus, a report, for example, on the percent ofduplicated applications for each step of the application process can beshown. For example, the benchmark has 2.5% of their approvedapplications as duplicates whereas, the particular lender has a 3%duplicate application rate. This means that the subject lender may haveinefficiencies since they are the “beneficiary” of more duplicateapplications than would be expected based upon industry norms. Fundingloans on the same property is a much more onerous problem. In thisexample, it should be noted that the lender in the example funds about0.8% of their loans on the same property as other lenders. The industrynorm is about 0.2%. This is a huge and financially damaging problem thatthe lender must fix and this report shows that our lender is beingadversely selected by some force in the market. This report will alertmanagement of each lending institution to the problem.

Furthermore, the data can be used to analyze the lending institution'sown efficiency as compared with an industry benchmark. As can be seen inFIG. 5, the time required for applications in lending institution tocomplete each phase is listed in the column entitled “Your Value(elapsed days)” while the time required for applications in the industryto complete each phase is listed in the column entitled “BenchmarkValue.” The difference between the two times is listed in the columnentitled “Difference.” Thus, for the lending institution, the“Pending—Out-for-document signature applications took 10 days to becompleted while the industry took 12-days. Thus, the lending institutionwas actually faster by 2 days. However, for “Pending—Docs received”applications, the lending institution took 12-days to complete while theindustry took 15-days. Thus, the lending institution was actually fasterby 3 days. Therefore, this can be an area to target for policies andprocedures to speed up the application completion time. Thus, thelending institution can now identify which areas are its strengths andwhich areas are its weaknesses with respect to application completiontime.

FIG. 6 shows one the flow charts of an exemplary embodiment of thepresent invention. As shown in step 600, the system collectsapplications from the various users, e.g., lenders. At step 610, thesystem analyzes the applications to detect whether 2 or more of theapplications have similar data, e.g., same property address. If thesystem does not find 2 or more data that are similar on any of theapplications, the system stops its analysis at step 620. If the systemdoes find two or more applications which have similar data, then in thenext step 630, the system checks to see if all of the applicationstatuses are “approved.” If the system determines that all of theapplications which have similar data have an approved status, then atstep 630, the system sends a “watch” alert to one or more of the usersindicating that there are other pending approved applications. If thesystem determines that of the application which have similar data do nothave an approved status, then at step 640, the system sends a “FraudAlert” to each user communicating that there is potential fraudulentactivity going on.

It is also to be understood that the following claims are intended tocover all of the generic and specific features of the invention hereindescribed, and all statement of the scope of the present inventionwhich, as a matter of language, might be said to fall therebetween.

1. A system comprising: physical data storage configured to store loanapplications data; and a computer system in communication with thephysical data storage, the computer system comprising computer hardware,the computer system programmed to: receive data from a plurality of loanapplications associated with real estate properties, wherein theplurality of loan applications data are associated with a plurality oflenders; store the loan applications data in the physical data storage;electronically extract, from the loan applications data, subjectproperty information associated with the plurality of loan applications;compare the extracted subject property information to identify any loanapplications from the plurality of loan applications that are using thesame subject property as collateral; electronically extract, from theloan applications data, loan status information associated with theidentified loan applications that are using the same subject property ascollateral; analyze the extracted loan status information to determineif the identified loan applications are currently pending and have anapproved status; and generate an alert if the identified loanapplications are currently pending and have an approved status.
 2. Thesystem of claim 1, wherein the alert comprises an email alert.
 3. Thesystem of claim 1, wherein the computer system is further programmed toprovide an interface to the plurality of lenders to access the loanapplications data stored in the physical data storage.
 4. The system ofclaim 1, wherein the computer system is further programmed to provide aninterface to an entity to search the loan applications data stored inthe physical data storage.
 5. The system of claim 1, wherein the loanapplication data is selected from a group consisting of a borrower name,an address of a subject property that a borrower seeks to finance, aloan amount, a loan purpose, whether the subject property is owneroccupied, the subject property value, a loan status with any statuschange date and time stamped, and loan-to-value estimates.
 6. The systemof claim 5, wherein the loan purpose is selected from a group consistingof purchase, refinance, cash out, and home equity line of credit.
 7. Asystem comprising: physical data storage configured to store loanapplications data; and a computer system in communication with thephysical data storage, the computer system comprising computer hardware,the computer system programmed to: receive data from a plurality of loanapplications associated with real estate properties; store the loanapplications data in the physical data storage; identify any loanapplications from the plurality of loan applications that are associatedwith a target lender by analyzing the loan applications data; determinea time for the target lender to complete one or more phases inprocessing a loan application by analyzing the identified loanapplications; determine one or more efficiency ratings for the targetlender based at least in part on the determined time for the targetlender to complete one or more phases in processing a loan application;and store the determined one or more efficiency ratings in the physicaldata storage.
 8. The system of claim 7, wherein the one or moreefficiency ratings are determined by comparing the target lender to anindustry benchmark.
 9. The system of claim 7, wherein the one or morephases comprise a funding phase.
 10. The system of claim 7, wherein theone or more phases comprise approval of a loan application phase. 11.The system of claim 7, wherein the loan applications data is furtheranalyzed to determine one or more financial risk ratings for the targetlender.
 12. The system of claim 11, wherein the one or more financialrisk ratings relate to a number of duplicate applications for the sameproperty received by the target lender.
 13. The system of claim 11,wherein the one or more financial risk ratings are determined bycomparing the target lender to an industry benchmark.
 14. Anon-transitory computer readable storage medium comprising instructionswhich, when executed by a computer system that includes a data processorand is connected to at least one data repository, perform a methodcomprising: (a) receiving, by the computer system through a networkcommunication channel, data from a plurality of loan applicationsassociated with real estate properties; (b) analyzing, by the dataprocessor of the computer system, the loan applications data todetermine one or more efficiency ratings for a lender associated withthe loan applications data, wherein the one or more efficiency ratingsrelate to a time for the lender to complete one or more phases inprocessing a loan application; and (c) storing, by the data processor ofthe computer system, the determined one or more efficiency ratings inthe at least one data repository.
 15. The non-transitory computerreadable storage medium of claim 14, wherein the one or more efficiencyratings are determined by comparing the lender to an industry benchmark.16. The non-transitory computer readable storage medium of claim 14,wherein the one or more phases comprise a funding phase.
 17. Thenon-transitory computer readable storage medium of claim 14, wherein theloan applications data is further analyzed to determine one or morefinancial risk ratings for the lender.
 18. The non-transitory computerreadable storage medium of claim 17, wherein the one or more financialrisk ratings relate to a number of duplicate applications for the sameproperty received by the lender.
 19. The non-transitory computerreadable storage medium of claim 17, wherein the one or more financialrisk ratings are determined by comparing the lender to an industrybenchmark.